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Consumer Protection Comes To Panama
CONSUMER PROTECTION COMES TO PANAMA By Steven Rich, Marketing Manager for Panama Offshore Legal Services Panama strengthens the rights of consumers when purchasing real estate and other goods and services. A year ago, Panama enacted a law prohibiting advertising fraud by real estate developers. Now a new law specifies additional rights for buyers. Law 45 of 2007 (known as The Consumer Protection Law) prohibits clauses in contracts allowing excessive delays or limiting the rights of consumers. If the delivery of services or goods takes too long, purchasers have the right to end the contract without penalties. This new law prohibits contracts calling for penalties such as loss of down payments or installments if the contract cancels through no fault by the purchaser. Sellers no longer have the sole right to cancel the contract. This new law eliminates the cancellation of contracts by developers wishing to resell for greater profits. Abusive clauses will become invalid if the contract excessively favors the vendor. What does that mean? Abusive clauses defined in the new law as follows: Those restricting adherent rights of consumers by limiting the obligations of the vendor. Excessively favors the vendor; or exempts the vendor from personal injury liability; or allows the vendor to cancel or modify the contract (unless the purchaser fails to comply); or requires consumers to waive rights in advance; or waives rights of consumers to take legal action; is illegible; or written in a language other than Spanish. A contract is also illegal if it allows excessive time for completion. The consumer now has the right to terminate such contracts without being subject to any penalties. New residential construction projects must establish clear written terms and conditions of the guarantee of workmanship. All advertising must be truthful. The consumer will have the right to demand fulfillment of such advertised promises. Every contract must specify delivery or completion dates if not immediately. Consumers have the option to terminate the contract if those dates pass without any penalties. The exact price and adjustments for increased cost of materials must be in writing. Consumers have the right to demand proportional price discounts for new construction when final specifications change substantially from what the contract stated.
Panama’s Consumer Protection Agency (Autoridad de Proteccion al Consumidor y Defensa de la Competencia) will create rules and regulations for enforcing this new law in the near future. This agency also investigates complaints against developers and real estate agents regarding false advertising and breach of contracts.
Aside from this new law, other Panamanian governmental agencies regulate the real estate construction industry.
Law 6 of 2006 prohibited fraud in advertising in the construction industry. On May 16, 2007, The Ministry of Housing (MIVI) created regulations preventing developers and their promoters from advertising or selling properties before the Master Plan approval facing fines up to 1% of the entire project’s value.
In the meantime, Panama’s National Authority of the Environment (ANAM) recently levied a $930,000 fine on a real estate tourism development for illegally cutting down trees that threatened the local ecosystem. The company failed to comply with their approved Environmental Impact Study and began other projects without a proper evaluation of its environmental impact. In 2004, ANAM imposed a record fine of $1 Million against the developer of a large project in Panama. Local courts are now ruling against property developers too. On November 27th, a Panama Superior court ruled against another property developer by declaring certain sections of a purchase contract null & void because they were “abusive”. One clause allowed the developer to rescind the contract and to keep the buyer’s deposits. Another clause allowed the developer to stop construction without any compensation to the purchasers or liability for damages caused. The last clause dealt with price increases because of rising costs of materials. However, this ruling has no precedent meaning that it does not have to be followed by other courts with similar claims. Panama is quickly protecting consumer rights in order to bolster foreign investments.
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Contributor's Note
Steven Rich is the marketing manager for Panama Offshore Legal Services an English speaking law firm whose website is: www.panama-offshore-services.com
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